1
Exhibit 10(h)(ii)
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "AGREEMENT") is entered into as of
May 18, 1999, by and between Oracle Corporation, a Delaware corporation
("BUYER") and Thinking Machines Corporation, a Delaware corporation ("SELLER").
RECITALS
Seller is engaged in the business of developing, marketing,
licensing, supporting and providing related services for Darwin (as defined in
Section 1.1 below) (collectively, the "Business"). Buyer desires to acquire
from Seller, and Seller desires to sell to Buyer, substantially all of the
assets of the Business on the terms and subject to the conditions set forth in
this Agreement.
AGREEMENT
In consideration of the mutual agreements, representations, warranties
and covenants set forth below, Buyer and Seller agree as follows:
1. DEFINITIONS.
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(a) "DARWIN" means the computer software product described in
SCHEDULE 1.1(A), including any and all source and object codes, binaries,
supplements, modifications, updates, corrections and enhancements to past and
present versions of such product, shipping versions of such product and
versions of such product under development, in each case as existing as of the
Closing Date; and any and all English and foreign language versions of past and
present versions of such products, shipping versions of such products and
versions of such product under development, in each case as existing as of the
Closing Date.
(b) "AFFILIATE" means, with respect to any Person, a Person
directly or indirectly controlling or controlled by or under common control
with such Person.
(c) "APPLICABLE LAW" as defined in Section 4.16(b).
(d) "ASSIGNMENT AND ASSUMPTION AGREEMENT" as defined in
Section 3.2(a).
(e) "ASSUMED LIABILITIES" as defined in Section 2.2.
(f) "CLOSING" means the consummation of the transactions
contemplated hereby.
(g) "CLOSING DATE" means the date of the Closing.
2
(h) "CODE" means the Internal Revenue Code of 1986, as
amended.
(i) "CONFIDENTIALITY AGREEMENT" as defined in Section
4.13(a).
(j) "COPYRIGHTS" means the copyrights, copyright
applications, pending applications, registrations, supplemental registrations
and recordings and all rights thereon.
(k) "CUSTOMER LISTS" means all customer lists maintained by
Seller relating to Darwin or the service and support of Darwin.
(l) "CUSTOMER SUPPORT MATERIALS" means any and all customer
support materials, including, without limitation, support training materials,
support bulletins (including, without limitation, copies of any and all
information on electronic bulletin boards), and any and all data contained in
Seller's customer support organization computer system relating to Darwin.
(m) "DAMAGES" as defined in Section 10.2.
(n) "DOCUMENTATION" as defined in Section 2.1(i).
(o) "EARN-OUT PAYMENTS" as defined in Section 2.4.
(p) "EARN-OUT PERIOD" as defined in Schedule 2.4.
(q) "EMBEDDED PRODUCTS" as defined in Section 4.8(a)(iii).
(r) "EMPLOYEES" as defined in Section 7.1(a).
(s) "END-USER LICENSES" as defined in Section 4.8(a)(ii).
(t) "ENGINEERING INFORMATION" means any and all design and
code documentation, methodologies, processes, trade secrets, design
information, product information, formulae, routines, engineering
specifications, technical manuals and data, drawings, inventions, technology,
know-how, techniques, engineering work papers, works-in-progress, works of
authorship and programmer's notes.
(u) "ERISA" as defined in Section 2.3(f).
(v) "ESCROW AGENT" as defined in Section 2.4.
(w) "ESCROW CONSIDERATION" as defined in Section 2.4.
(x) "ESCROW TERMINATION DATE" as defined in Section 10.1.
(y) "FACILITIES" as defined in Section 4.16(a).
(z) "GAAP" means generally accepted accounting principles of
the United States as set forth by the Financial Accounting Standards Board.
2
3
(aa) "GOVERNMENTAL AUTHORIZATIONS" means the permits,
authorizations, consents or approvals of any Governmental Entity which are a
condition to the lawful consummation of the transactions contemplated hereby
listed on SCHEDULE 1.1(K) to this Agreement.
(bb) "GOVERNMENTAL ENTITY" means any court, or any federal,
state, municipal or other governmental authority, department, commission,
board, agency or other instrumentality (domestic or foreign).
(cc) "HAZARDOUS" as defined in Section 4.16(b).
(dd) "HAZARDOUS SUBSTANCE" as defined in Section 4.16(b).
(ee) "INDEMNIFIED PERSON" as defined in Section 10.2.
(ff) "INDEMNIFIED PERSONS" as defined in Section 10.2.
(gg) "INITIAL PAYMENT" as defined in Section 2.4.
(hh) "INTELLECTUAL PROPERTY RIGHTS" means Patent rights
(including without limitation claims against third Persons for infringement
whether or not heretofore asserted) Copyrights, trade secret rights, Trademark
rights, design rights, rights of priority, rights in Engineering Information,
Moral Rights and any other similar tangible or intangible proprietary rights
existing under judicial or statutory law of any country in the world, or under
any treaty.
(ii) "INVENTORIES" as defined in Section 2.1(b).
(jj) "LIEN" means any mortgage, pledge, lien, security
interest, option, license, covenant, condition, restriction, encumbrance,
charge or other third-party claim of any kind.
(kk) "MARKETING OR USER MATERIALS" means any and all customer
and marketing materials relating to Darwin, including, without limitation,
product documentation, sale and marketing collateral, white papers, product
data sheets known as "Software Product Descriptions," performance benchmark
reports, customer training materials, sales training materials and sales
presentation materials.
(ll) "MATERIAL ADVERSE EFFECT" with respect to a Person means
any event, change or effect that is materially adverse to the condition
(financial or otherwise), properties, assets, liabilities, business,
operations, results of operations of such Person and its Affiliates, taken as a
whole.
(mm) "MORAL RIGHTS" means any rights to claim authorship of
any inventions, improvements, works of authorship and other innovations of any
kind, computer software (whether or not they are eligible for patent,
copyright, trademark, trade secret or other legal protections) ("INNOVATION"),
to object to or prevent any modification of any Innovation, to withdraw from
3
4
circulation or control the publication or distribution of any Innovation, and
any similar right, existing under judicial or statutory law of any country in
the world, or under any treaty, regardless of whether or not such right is
called or generally referred to as a "moral right".
(nn) "NET FEES" as defined in Schedule 2.4.
(oo) "NONSTANDARD SUPPORT AGREEMENTS" as defined in Section
4.8(l).
(pp) "NON-TRANSFERRED EMPLOYEE" as defined in Section 7.3.
(qq) "OFFICER'S CERTIFICATE" as defined in Section 10.3.
(rr) "PATENTS" means all patents, patent applications,
divisional applications, continuing applications, or reissue patents related
thereto, and any and all foreign patents and patent applications corresponding
thereto or relying thereon for its filing or convention date.
(ss) "PERMITS" as defined in Section 2.1(j).
(tt) "PERSON" means an individual, corporation, partnership,
association, trust, government or political subdivision or agent or
instrumentality thereof, or other entity or organization.
(uu) "PURCHASED ASSETS" as defined in Section 2.1.
(vv) "REQUIRED CONSENT" as defined in Section 4.6(a).
(ww) "RESTRICTED BUSINESS" as defined in Section 6.14(a)(i).
(xx) "RETAINED FED RIGHTS" as defined in Section 4.8(f).
(yy) "SELLER INTELLECTUAL PROPERTY" as defined in Section
4.8(a).
(zz) "SELLER'S KNOWLEDGE" OR "SELLER'S BEST KNOWLEDGE" means
the actual knowledge of Xxxxxx X. Xxxxxxx and Xxxxxx X. XxXxxxxxxx, as well as
the knowledge such officers would have had after due inquiry of those employees
of Seller with principal responsibility for the specific matter as to which
Seller is making the representation and warranty and appropriate internal
follow-up on the responses received from such employees as is reasonable in
light of the facts and circumstances, regardless of whether such "due inquiry"
was made.
(aaa) "STANDARD SUPPORT AGREEMENTS" as defined in Section
4.8(l).
(bbb) "SUPPORT AGREEMENTS" as defined in Section 4.8(l).
(ccc) "TARGET NET FEES" as defined in Schedule 2.4.
(ddd) "TAXES" means all taxes, however denominated, including
any interest, penalties or other additions to tax that may become payable in
respect thereof, (i) imposed by any federal, territorial, state, local or
4
5
foreign government or any agency or political subdivision of any such
government, for which Buyer could become liable as successor to or transferee
of the Business or the Purchased Assets or which could become a charge against
or lien on any of the Purchased Assets, which taxes shall include, without
limiting the generality of the foregoing, all sales and use taxes, ad valorem
taxes, excise taxes, business license taxes, occupation taxes, real and
personal property taxes, stamp taxes, environmental taxes, real property gains
taxes, transfer taxes, payroll and employee withholding taxes, unemployment
insurance contributions, social security taxes, and other governmental charges,
and other obligations of the same or of a similar nature to any of the
foregoing, which are required to be paid, withheld or collected, or (ii) any
liability for amounts referred to in (i) as a result of any obligations to
indemnify another person.
(eee) "TERRITORY" as defined in Section 6.14(a).
(fff) "TESTING MATERIALS" means any and all Engineering
Information relating to testing and correcting defects in Darwin (including,
without limitation, regression tests, test beds, test plans, software defect
database and historical defect data) and other documents and materials, which
are necessary or used to maintain, enhance and correct errors in Darwin and to
provide customer technical support.
(ggg) "THIRD PERSON INTELLECTUAL PROPERTY" as defined in
Section 4.8(a)(iii).
(hhh) "TOXIC" as defined in Section 4.16(b).
(iii) "TRADEMARKS" means the common law trademarks, trademark
applications, trademark registrations, trade names, service marks, trade
styles, trade dress and such unregistered rights as may exist through use and
foreign counterparts thereof.
(jjj) "TRANSFERRED AGREEMENTS" as defined in Section 2.1(c).
(kkk) "TRANSFERRED EMPLOYEE" as defined in Section 7.1(a).
2. SALE AND PURCHASE
2.1 TRANSFER OF ASSETS. Subject to the terms and conditions of this
Agreement, Seller shall sell, assign, grant, transfer, and deliver to Buyer, or
to any Affiliate of Buyer designated by Buyer, and Buyer shall purchase and
accept from Seller as of the Closing Date, free and clear of all Liens, the
following tangible and intangible assets, wherever located, as the same shall
exist on the Closing Date (the "PURCHASED ASSETS"):
(a) all tangible personal property and leases of and other
interests in tangible personal property used in connection with the Business,
including, without limitation, the items listed on SCHEDULE 2.1(A)(I), except
for those items listed on the Excluded Assets List as set forth on SCHEDULE
2.1(A)(II);
(b) all raw materials, work-in-process, finished goods,
supplies and other inventories of the Business (the "INVENTORIES");
5
6
(c) all rights under contracts, agreements, leases and other
interests in real and personal property, licenses, commitments, sales and
purchase orders and other instruments listed on SCHEDULE 2.1(C) (collectively,
the "TRANSFERRED AGREEMENTS");
(d) that portion of cash and accounts receivable for which a
customer has paid or pays Seller relating to support, maintenance or service
obligations under the Transferred Agreements with respect to a service term
which includes any period after the Closing Date, as set forth on SCHEDULE
2.1(D). Such proportionate amount shall be determined by allocating the portion
of the service term through the Closing Date and the remainder of such service
term, based on the number of days included in each.
(e) all of Seller's rights, claims, credits, causes of action
or rights of set-off against third parties relating to the Purchased Assets,
including, without limitation, unliquidated rights under warranties;
(f) Darwin;
(g) all Intellectual Property Rights that are related to,
used in, or derived from Darwin, including without limitation all:
(i) Copyrights in and to the Purchased Assets,
including, without limitation, the items set forth on SCHEDULE 2.1(G)(I);
(ii) Trademarks, including without limitation the
trademarks Darwin and Thinking Machines, as well as the domain names
XxxxxxxxXxxxxxxx.xxx and Xxxxx.xxx, and all goodwill associated therewith;
(iii) Patents, including without limitation, those
identified and set forth on SCHEDULE 2.1(G)(III);
(iv) Engineering Information; and
(v) Moral Rights;
(h) all documentation, whether in hard copy or electronic
format, that is used in, derived from or relates to Darwin (the
"DOCUMENTATION"), including, without limitation, Testing Materials, Marketing
or User Materials, Customer Support Materials, Customer Lists, list of former
or prospective suppliers and all personnel records of Transferred Employees;
(i) all permits, authorizations, consents and approvals of
any Governmental Entity affecting or relating in any way to the Business,
including without limitation, the items listed on SCHEDULE 2.1(I), but
specifically excluding, the qualification of Seller to do business in any state
(the "PERMITS");
6
7
(j) all computer software programs, data and associated
licenses used in connection with the Business; and
(k) all goodwill associated with the Business or the
Purchased Assets, together with the right to represent to third parties that
Buyer is the successor to the Business.
2.2 TRANSFER OF LIABILITIES. Subject to the terms and conditions of
this Agreement, Buyer or an Affiliate of Buyer designated by Buyer agrees,
effective as of the Closing Date, to assume the following liabilities (the
"ASSUMED LIABILITIES"):
(a) The liabilities and obligations of Seller relating to the
time period after the Closing Date arising under the Transferred Agreements,
including but not limited to product support and maintenance obligations under
such Transferred Agreements, other than the liabilities attributable to any
failure by Seller to comply with the terms thereof;
2.3 EXCLUDED LIABILITIES. Except for those liabilities expressly
assumed by Buyer, Buyer shall not assume and shall not be liable for, and
Seller and its Affiliates shall retain and remain solely liable for and
obligated to discharge, all of the debts, contracts, agreements, commitments,
obligations and other liabilities of any nature whatsoever of Seller and its
Affiliates, whether known or unknown, accrued or not accrued, fixed or
contingent, including without limitation, the following:
(a) Any product warranty claims (i) by a distributor or
reseller relating to any Purchased Assets shipped by Seller or any of its
Affiliates to such distributor or reseller on or prior to the Closing Date or
(ii) by an end-user relating to any Purchased Assets shipped by Seller or any
of its Affiliates to such end-user on or prior to the Closing Date;
(b) Any liability for breaches by Seller or any of its
Affiliates on or prior to the Closing Date of any contract or any other
instrument, agreement, contract or purchase order or any liability for payments
or amounts due under any Transferred Agreement or any other instrument,
agreement, contract or purchase order on or prior to the Closing Date;
(c) Any liability or obligation for Taxes attributable to or
imposed upon Seller or any of its Affiliates, or attributable to or imposed
upon the Purchased Assets, for any period (or portion thereof) through the
Closing Date, including, without limitation, any Taxes attributable to or
arising from the transactions contemplated by this Agreement;
(d) Any liability or obligation for or in respect of any
loan, other indebtedness for money borrowed, or account payable of Seller or
any of its Affiliates, including any such liabilities owed to Affiliates of
Seller;
(e) Any liability or obligation arising as a result of any
legal or equitable action or judicial or administrative proceeding initiated at
any time, to the extent relating to any action or omission on or prior to the
Closing Date by or on behalf of Seller or any of its Affiliates, including,
without limitation, any liability for infringement of intellectual property
rights, breach of product warranty, injury or death caused by products, or
violations of federal or state securities or other laws;
7
8
(f) Any liability or obligation arising on or prior to the
Closing Date out of any "employee benefit plan," as such term is defined by the
Employee Retirement Income Security Act of 1974 ("ERISA") or other employee
benefit plans;
(g) Any liability or obligation for making payments of any
kind (including as a result of the sale of Purchased Assets or as a result of
the termination of employment by Seller of employees, or other claims arising
out of the terms and conditions of employment with Seller, or for vacation or
severance pay or otherwise) to employees of Seller or in respect of payroll
taxes for employees of Seller;
(h) Any liability of Seller incurred in connection with the
making or performance of this Agreement and the transactions contemplated
hereby;
(i) Any liability of Seller arising out of the violation of
or failure to comply with any environmental regulations applicable to any
aspect of the Business; and
(j) Any costs or expenses of Seller incurred in connection
with shutting down, deinstalling and removing equipment not purchased by Buyer,
and the costs associated with all contracts and agreements not assumed by
Buyer.
2.4 PURCHASE PRICE. Subject to the performance by Seller of all of its
obligations under this Agreement (including, without limitation, delivering all
documents required to be delivered) at the Closing, in consideration of the
acquisition of the Purchased Assets under Section 2.1, Buyer agrees (i) to pay
Seller four million, three hundred thousand dollars ($4,300,000) (the "INITIAL
PAYMENT"), (ii) to deliver to the Escrow Agent (the "ESCROW AGENT") four
hundred thousand dollars ($400,000) (the "ESCROW CONSIDERATION") as set forth
in Section 2.5 below, and (iii) to pay Seller the earn-out payments to the
extent and as set forth in SCHEDULE 2.4 (the "EARN-OUT PAYMENTS"), subject to
Section 2.5 and Section 10.6. The Initial Payment shall be paid in cash by wire
transfer at the Closing.
2.5 HOLDBACK. Notwithstanding any investigation of the Business of
Seller made by or on behalf of the Buyer, at the Closing the Escrow
Consideration shall be delivered by Buyer directly to the Escrow Agent for
deposit in accordance with the terms of the Escrow Agreement in substantially
the form attached hereto as EXHIBIT A.
2.6 RECORDS; INSPECTION. Buyer shall keep books of account and records
that are accurate in all material respects pertaining to the license activities
and revenues of Buyer relating to Darwin and the license revenues from its
distributors (including the Relative Value Percentage for each application or
product into which Darwin has been embedded or incorporated) to the extent such
records are required in the ordinary course of Buyer's business or in
accordance with GAAP principles. No more than once during any twelve (12) month
period, Seller, at Seller's sole expense, shall be entitled to employ an
independent Certified Public Accountant who is not compensated based on the
results of the audit, and who is acceptable to Buyer (which acceptance shall
8
9
not be unreasonably withheld), to inspect such books of account and records
upon reasonable notice to Buyer, and at a reasonable time during normal
business hours for the purpose of verifying the fees payable to Seller pursuant
to this Agreement. Unless necessary to establish Seller's right to payment of
the Purchase Price payable hereunder, Seller's auditor shall hold all
information obtained in strict confidence; shall not disclose such information
to any other person or entity without Buyer's prior written consent; and shall
not disclose to Seller any information regarding Buyer's business other than
any noncompliance by Buyer with the fee payment provisions hereof.
2.7 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the Purchased Assets as provided in SCHEDULE 2.7 to be prepared
by Buyer for purposes of complying with the requirements of Section 1060 of the
Code and the regulations thereunder. Buyer and Seller agree to each prepare and
file on a timely basis with the Internal Revenue Service (and applicable state
tax authorities) substantially identical and supplemental Internal Revenue
Service Forms 8594 (and corresponding state tax forms) consistent with Buyer's
allocation of the Purchase Price. If any Tax authority challenges such
allocation, the party receiving notice of such challenge shall give the other
prompt written notice thereof and the parties shall cooperate in order to
preserve the effectiveness of such allocation.
3. CLOSING
3.1 CLOSING. Subject to the terms and conditions of this Agreement,
the Closing shall take place on such date, as soon as practicable after all
conditions precedent in Sections 8 and 9 have been satisfied or waived, as the
parties may agree, but in any case no later than May 31, 1999.
3.2 ACTIONS AT THE CLOSING. At the Closing, Seller shall deliver the
Purchased Assets to Buyer, Buyer shall deliver the Initial Payment to Seller
and deliver the Escrow Consideration to the Escrow Agent, and Buyer and Seller
shall take such actions and execute and deliver such agreements, bills of sale,
and other instruments and documents as necessary or appropriate to effect the
transactions contemplated by this Agreement in accordance with its terms,
including without limitation the following:
(a) OTHER AGREEMENTS; ARRANGEMENTS. Seller shall deliver to
Buyer a General Xxxx of Sale in mutually acceptable form and an Assignment and
Assumption Agreement in mutually acceptable form (each an "ASSIGNMENT AND
ASSUMPTION AGREEMENT") with respect to each Transferred Agreement assigned to
Buyer, duly executed by Seller, assigning to Buyer all of Seller's right, title
and interest in and to the Assets.
(b) PURCHASE PRICE. Buyer shall deliver the Initial Payment
to the Seller in accordance with Section 2.4 and the Escrow Consideration to
the Escrow Agent in accordance with Sections 2.4 and 2.5.
(c) TITLE. Seller shall provide reasonable evidence of valid
title to such of the Purchased Assets as Buyer may reasonably request in
writing prior to the Closing, in form and substance reasonably satisfactory to
Buyer.
9
10
(d) THIRD PARTY CONSENTS AND ASSIGNMENTS. Seller shall
deliver to Buyer any assignments, and any required consents to assignment, that
it has obtained in respect of the Transferred Agreements, duly executed by
parties having the authority to so assign or consent to assign, in form and
substance as Buyer shall reasonably request, as well as written confirmation
from such third parties that the Transferred Agreements are in good standing.
(e) SELLER DOCUMENTS. At the Closing, Seller shall deliver to
Buyer any and all documents required to satisfy the conditions set forth in
Section 8 of this Agreement and any other closing documents reasonably
requested by Buyer.
(f) BUYER DOCUMENTS. At the Closing, Buyer shall deliver to
Seller any and all documents required to satisfy the conditions set forth in
Section 9 of this Agreement and any other closing documents reasonably
requested by Seller.
(g) POST-CLOSING ACTIONS. Subsequent to the Closing Date,
Seller shall, and shall cause any Affiliate of Seller to, from time to time
execute and deliver, upon the request of Buyer, all such other and further
materials and documents and instruments of conveyance, transfer or assignment
as may reasonably be requested by Buyer to effect, record or verify the
transfer to and vesting in Buyer of Seller's and any of Seller's Affiliates'
right, title and interest in and to the Purchased Assets, free and clear of all
Liens, in accordance with the terms of this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF SELLER.
Each representation and warranty set forth below is qualified by any
exception or disclosures set forth in the Seller Disclosure Schedule attached
hereto, which exceptions specifically reference the Section(s) to be qualified.
In all other respects, each representation and warranty set out in this Section
4 is not qualified in any way whatsoever, will not merge on Closing or by
reason of the execution and delivery of any agreement, document or instrument
at the Closing, will remain in force on and after the Closing Date, is given
with the intention that liability is not confined to breaches discovered before
Closing, is separate and independent and is not limited by reference to any
other representation or warranty or any other provision of this Agreement, and
is made and given with the intention of inducing the Buyer to enter into this
Agreement. Seller represents and warrants to Buyer as follows:
4.1 ORGANIZATION, STANDING AND POWER. Seller is a corporation, duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Seller has the requisite corporate power and
authority and all necessary permits, authorizations, consents, and approvals of
all Governmental Entities to own, lease and operate its properties and to carry
on the Business as now being conducted and as proposed to be conducted, except
where the failure to have such power, authority and governmental approvals
would not, individually or in the aggregate, have a Material Adverse Effect on
the Business. Seller is duly qualified or licensed as a foreign corporation to
do business, and is in good standing, in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except where the failure to be
so qualified or licensed and in good standing that would not, individually or
in the aggregate, have a Material Adverse Effect on the Business.
10
11
4.2 AUTHORITY. The execution and delivery of this Agreement (and all
other agreements and instruments contemplated under this Agreement) by Seller,
the performance by Seller of its obligations hereunder and thereunder, and the
consummation by Seller of the transactions contemplated hereby and thereby have
been duly authorized by all necessary action by the Board of Directors and,
before the Closing, shall be duly authorized by the shareholders of Seller, and
no other act or proceeding on the part of or on behalf of Seller or its
shareholders is necessary to approve the execution and delivery of this
Agreement and such other agreements and instruments, the performance by Seller
of its obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby. The signatory officers of Seller
have the power and authority to execute and deliver this Agreement and all of
the other agreements and instruments to be executed and delivered by Seller
pursuant hereto, to consummate the transactions hereby and thereby contemplated
and to take all other actions required to be taken by Seller pursuant to the
provisions hereof and thereof.
4.3 EXECUTION AND BINDING EFFECT. This Agreement has been duly and
validly executed and delivered by Seller and constitutes, and the other
agreements and instruments to be executed and delivered by Seller pursuant
hereto, upon their execution and delivery by Seller, will constitute (assuming,
in each case, the due and valid authorization, execution and delivery thereof
by Buyer), legal, valid and binding agreements of Seller, enforceable against
Seller in accordance with their respective terms, except as enforceability may
be limited by bankruptcy, insolvency, moratorium, or other laws affecting the
enforcement of creditors' rights generally or provisions limiting competition,
and by equitable principles.
4.4 CONSENTS AND APPROVALS OF GOVERNMENTAL ENTITIES. Other than the
Governmental Authorizations there is no requirement applicable to Seller to
make any filing, declaration or registration with, or to obtain any permit,
authorization, consent or approval of, any Governmental Entity as a condition
to the lawful consummation by Seller of the transactions contemplated by this
Agreement and the other agreements and instruments to be executed and delivered
by Seller pursuant hereto or the consummation by Seller of the transactions
contemplated herein or therein.
4.5 NO VIOLATION. Neither the execution, delivery and performance of
this Agreement and all of the other agreements and instruments to be executed
and delivered pursuant hereto, nor the consummation of the transactions
contemplated hereby or thereby, will, with or without the passage of time or
the delivery of notice or both, (a) conflict with, violate or result in any
breach of the terms, conditions or provisions of the Certificate of
Incorporation or Bylaws of Seller, (b) conflict with or result in a violation
or breach of, or constitute a default or require consent of any Person (or give
rise to any right of termination, cancellation or acceleration) under, any of
the terms, conditions or provisions of any contract, notice, bond, mortgage,
indenture, license, franchise, permit, agreement, lease or other instrument or
obligation to which Seller is a party or by which Seller or any of the
Purchased Assets may be bound, (c) violate any statute, ordinance or law or any
rule, regulation, order, writ, injunction or decree of any Governmental Entity
11
12
applicable to Seller or by which any properties or assets of Seller may be
bound, or (d) result in any cancellation of, or obligation to repay, any grant,
loan or other financial assistance received by Seller from any Governmental
Entity. No "bulk sales" legislation under any applicable Commercial Code
applies to the transactions contemplated by this Agreement.
4.6 CONSENTS. SECTION 4.6 of the Seller Disclosure Schedule sets forth
each agreement, contract or other instrument binding upon Seller requiring a
consent as a result of the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby (each a
"REQUIRED CONSENT").
4.7 ASSETS GENERALLY.
(a) The Purchased Assets include all properties, tangible and
intangible, and only such properties currently used by Seller in operating the
Business and necessary for Buyer to market, license, implement, support,
modify, enhance, upgrade and maintain the Purchased Assets in a manner
substantially equivalent to the manner in which Seller has operated the
Business prior to and through the Closing Date. Other than the Required
Consents and the Governmental Approvals, no licenses or other consents from, or
payments to, any other Person are or will be necessary for Buyer to operate the
Business and use the Purchased Assets in the manner in which Seller has
operated the same.
(b) Seller holds good and marketable title, license or
leasehold interest to all of the Purchased Assets and has the complete and
unrestricted power and the unqualified right to sell, assign and deliver the
Purchased Assets to Buyer. Upon consummation of the transactions contemplated
by this Agreement, Buyer will acquire good and marketable title, license or
leasehold interest to the Purchased Assets free and clear of any Liens, and
there exists no restriction on the use or transfer of the Purchased Assets. No
Person other than Seller has any right or interest in the Purchased Assets,
including the right to grant interests in the Purchased Assets to third
parties, except for Purchased Assets licensed or leased from third parties
which are set forth in the Seller Disclosure Schedule and identified as such.
(c) None of the Purchased Assets that constitute tangible
personal property is held under any lease, security agreement, conditional
sales contract, Lien, or other title retention or security arrangement.
(d) Seller has not entered into any agreement that restricts
Buyer's right to sell, resell, license or sublicense any of the Purchased
Assets or engage in the Business nor, to Seller's Knowledge, (i) do any such
restrictions exist or (ii) will any such restrictions be imposed on Buyer as a
consequence of the transactions contemplated by this Agreement or by any
agreement referenced in this Agreement.
(e) All of the Purchased Assets are in good operating
condition and repair, as required for their use in the Business as presently
conducted, reasonable wear and tear excepted, and conform to all applicable
laws, except where the failure to so conform would not result in a Material
Adverse Effect, and no notice of any violation of any law relating to any of
the Purchased Assets or Assumed Liabilities has been received by Seller.
12
13
4.8 INTELLECTUAL PROPERTY.
(a) Seller owns, or is licensed or otherwise possesses
legally enforceable rights to use, all Intellectual Property Rights material to
the conduct of its Business as currently conducted, including without
limitation all such Intellectual Property Rights registered in the name of
Seller ("SELLER INTELLECTUAL PROPERTY"). Seller has taken reasonable measures
to protect the proprietary nature of each item of Seller Intellectual Property
that it considers confidential, and to maintain in confidence all trade secrets
and confidential information that it presently owns or uses, except where the
failure to own, license or possess legally enforceable rights to use such
Seller Intellectual Property would not, individually or in the aggregate,
reasonably be expected to result in a material loss of benefits or a material
loss to the Business.
(i) Section 4.8(a)(i) of the Seller Disclosure
Schedule lists, as of the date hereof, all patents and patent applications and
all trademarks, registered copyrights, trade names and service marks owned by,
or licensed exclusively to, Seller or any of its Affiliates and which are
currently used in connection with the Business, including the jurisdictions in
which each item of such Seller Intellectual Property has been issued or
registered or in which any such application for such issuance or registration
has been filed.
(ii) Section 4.8(a)(ii) of the Seller Disclosure
Schedule lists all users of Darwin. Except as otherwise expressly set forth in
this Agreement or the Seller Disclosure Schedule, neither Seller nor any of its
Affiliates has granted to any person or entity, and no person or entity, other
than Seller (including, without limitation, any independent contractors who
have performed services related to the Business), holds any rights in any of
the Seller Intellectual Property. Neither Seller nor any of its Affiliates has
granted to any person or entity, and no person or entity, other than Seller
(including, without limitation, any independent contractors who have performed
services related to the Business), holds any licenses to use, practice,
produce, distribute, license, sublicense or sell any of the Seller Intellectual
Property. All of the authorized users of Darwin listed in the Seller Disclosure
Schedule are authorized to use Darwin pursuant to non-exclusive object code
licenses granted for use of Darwin (the "End-User Licenses").
(iii) Section 4.8(a)(iii) of the Seller Disclosure
Schedule lists, as of the date hereof, all written licenses, sublicenses and
other agreements to which Seller is a party and pursuant to which Seller is
authorized to use any third Person Intellectual Property Rights, including
software, opensource, freeware or shareware ("THIRD PERSON INTELLECTUAL
PROPERTY") which is incorporated in Darwin or used in connection with the
Business, or any material product or service currently under development
("EMBEDDED Products").
(iv) Section 4.8(a)(iv) of the Seller Disclosure
Schedule lists, as of the date hereof, all written agreements or other
arrangements under which Seller has provided or agreed to provide source code
of Darwin or any product used in the Business to any third Person.
Seller has made available to Buyer correct and
complete copies of all Patents (owned by Seller), and all licenses, sublicenses
and agreements referred to in this Section 4.8(a), each as amended to date.
Except for retail purchases of software, Seller is not a party to any oral
13
14
license, sublicense or agreement which, if reduced to written form, would be
required to be listed in Section 4.8 of the Seller Disclosure Schedule under
the terms of this Section 4.8(a).
(b) With respect to each item of Seller Intellectual Property
that Seller owns: (i) other than common law trademarks, and subject to such
rights as have been granted by Seller under non-exclusive license agreements
and joint development agreements entered into by Seller (copies of which have
previously been made available or disclosed in writing to Buyer), Seller
possesses all right, title and interest in and to such item; and (ii) such item
is not subject to any outstanding judgment, order, decree, stipulation or
injunction that materially interferes with the conduct of the Business as
currently conducted.
(c) Except as set forth in Section 4.8 of the Seller
Disclosure Schedule, with respect to each item of Third Person Intellectual
Property listed in Section 4.8(a)(iii): (i) the license, sublicense or other
agreement covering such item is legal, valid, binding, enforceable and in full
force and effect with respect to Seller, and, to Seller's Knowledge, is legal,
valid, binding, enforceable and in full force and effect with respect to each
other party thereto; (ii) Seller is not in material breach or default
thereunder, and, to Seller's Knowledge, no other party to such license,
sublicense or other agreement is in material breach or default thereunder, and,
to Seller's Knowledge, no event has occurred which with notice or lapse of time
would constitute a material breach or default by Seller or permit termination,
modification or acceleration thereunder by the other party thereto; (iii) to
Seller's Knowledge, the underlying item of Third Person Intellectual Property
is not subject to any outstanding judgment, order, decree, stipulation or
injunction to which Seller is a party or has been specifically named that
materially interferes with the conduct of the Business as currently conducted,
nor, to Seller's Knowledge, subject to any other outstanding judgment, order,
decree, stipulation or injunction that materially interferes with the conduct
of the Business as currently conducted.
(d) Except as set forth in Section 4.8 of the Seller
Disclosure Schedule, as of the date hereof, Seller has not (i) been named in
any suit, action or proceeding as to which it has been served with process
which involves a claim of infringement or misappropriation of any Intellectual
Property Right of any third Person or (ii) received any written notice alleging
any such claim of infringement or misappropriation. Seller has made available
to Buyer correct and complete copies of all such suits, actions or proceedings
or written notices. To Seller's Knowledge, except as set forth in Section 4.8
of the Seller Disclosure Schedule, the manufacturing, marketing, licensing or
sale of the products or the performance of the services offered by Seller do
not currently infringe, and have not infringed, any Intellectual Property Right
of any third person (other than patent rights) or, to Seller's Knowledge, any
patent rights of third parties; and, to the knowledge of Seller, none of Seller
Intellectual Property rights are being infringed by activities, products or
services of any third person.
(e) Except as set forth in Section 4.8 of the Seller
Disclosure Schedule, the execution and delivery of this Agreement by Seller,
and the consummation of the transactions contemplated hereby (including,
without limitation, the incorporation of any technology covered by any
Intellectual Property Rights in any product of Buyer or an Affiliate of Buyer)
14
15
will not breach, violate or conflict with any instrument or agreement governing
any Intellectual Property Rights necessary or required for, or used in, the
conduct of the Business as presently conducted and will not cause the
forefeiture or termination of any such Intellectual Property Rights or in any
way impair the right of Buyer or any of its affiliates to use, sell, license or
dispose of, or to bring any action for the infringement of, any such
Intellectual Property Right or portion thereof.
(f) Except for Embedded Products for which Seller has valid
non-exclusive licenses which are disclosed in Section 4.8 of the Seller
Disclosure Schedule and which are adequate for Seller's business as presently
conducted, and except for usual and customary rights retained by the United
States government with respect to Intellectual Property Rights developed under
research contracts with the federal government (the "RETAINED FED RIGHTS"),
Seller is the sole and exclusive owner or the licensee of, with all right,
title and interest in and to all Seller Intellectual Property (free and clear
of any liens or encumbrances), and has sole and exclusive rights (and is not
contractually obligated to pay any compensation to any third Person in respect
thereof) to the use and distribution thereof or the material covered thereby in
connection with the services or products in respect of which Seller
Intellectual Property is being used, except where the failure to have such
rights would not reasonably be expected to result in a material loss of
benefits or loss to the Business. To Seller's Knowledge, the United States
government has never exercised, and Seller has no notice that the government
intends to exercise, its rights to use or provide to others the use of the
Retained Fed Rights with respect to any Seller Intellectual Property in a
manner that would be material to Seller's non-governmental Business. The
Retained Fed Rights do not materially interfere with the conduct of the
Business.
(g) Seller has made available to Buyer copies of Seller's
standard forms of End-User Licenses. Except as disclosed in Section 4.8 of the
Seller Disclosure Schedule (which describes the material variations from the
standard form of End-User License), as of the date hereof, Seller has not
entered into any End-User Licenses which contain terms materially different
than as set forth in the standard forms of such agreements made available to
Buyer.
(h) Seller has taken reasonable security measures to
safeguard and maintain the secrecy, confidentiality and value of, and its
property rights in, all Seller Intellectual Property. All officers, employees
and consultants of Seller who have access to proprietary information or Seller
Intellectual Property have executed and delivered to Seller an agreement
regarding the protection of proprietary information and the assignment to
Seller of all Intellectual Property Rights arising from the services performed
for Seller by such persons. To Seller's Knowledge, no current or prior
officers, employees or consultants of Seller claim any ownership interest in
any Seller Intellectual Property as a result of having been involved in the
development of such property while employed by or consulting to Seller, or
otherwise. Except as set forth in Section 4.8 of the Seller Disclosure Schedule
and except for the Embedded Products, all Seller Intellectual Property has been
developed by employees or consultants of Seller (or its predecessor), within
the course and scope of their employment or consulting agreement.
(i) No government funding or university or college facilities
were used in the development of Darwin and Darwin was not developed pursuant to
any contract or other agreement with any person or entity except pursuant to
contracts or agreements listed in Section 4.8 of the Seller Disclosure
Schedule.
15
16
(j) Section 4.8 of the Seller Disclosure Schedule lists all
warranty claims (including any pending claims) related to Darwin and the nature
of such claims, except for customary product support and maintenance, that are
pending or were made within the past twelve months. Except as set forth in
Section 4.8 of the Seller Disclosure Schedule, Seller has not made any material
oral or written representations or warranties with respect to its products or
services.
(k) Except as set forth in Section 4.8 of the Seller
Disclosure Schedule, Seller has not been in violation of, and is in compliance
with, the Export Administration Act of 1979, as amended, and all regulations
promulgated thereunder.
(l) As part of the Seller Disclosure Schedule, Seller has
provided Buyer a list (including names, addresses, contact names, telephone
numbers as well as the termination date and next renewal date of the
agreement), which is complete in all material respects, of all agreements or
other arrangements pursuant to which Seller is obligated to provide support
services (such agreements, as supplemented below, are referred to collectively
as the "SUPPORT Agreements"). Except for the nonstandard support agreements
specified in Section 4.8(l) of the Seller Disclosure Schedule (the "NONSTANDARD
SUPPORT AGREEMENTS"), all of the Support Agreements are in all material
respects in the form of the agreement identified as the Standard Support
Agreement set forth in the Seller Disclosure Schedule (the "STANDARD SUPPORT
AGREEMENT"). Neither the Standard Support Agreement nor any other agreement
would obligate Buyer after the Closing Date to provide any improvement,
enhancement, change in functionality or other alteration to the performance of
Darwin. The versions of the products currently supported by Seller are set
forth in the Seller Disclosure Schedule. Prior to the Closing, Seller will
supplement the Seller Disclosure Schedule with any addresses, contact names and
telephone numbers omitted from the initial Seller Disclosure Schedule to
include: (i) all Standard Support Agreements entered into between the date
hereof and the Closing; (ii) any Nonstandard Support Agreements which were
inadvertently omitted from the Seller Disclosure Schedule and that do not,
individually or in the aggregate, add to the Buyer's costs for the provision of
support services, other than in a DE MINIMIS respect; and (iii) all Nonstandard
Support Agreements that were entered into between the date hereof and the
Closing with the written consent of the Buyer. Section 4.8(l) of the Seller
Disclosure Schedule sets forth and indicates the agreements with source code
escrow provisions relative to Darwin or other products used in the Business.
Neither Seller nor its Affiliates has granted any third party the right to
furnish support or maintenance services with respect to Darwin to any other
third party.
(m) All fees to maintain Seller's rights in the Intellectual
Property Rights, including, without limitation, patent and trademark
registration and prosecution fees and all professional fees in connection
therewith pertaining to the Intellectual Property Rights due and payable on or
before the Closing Date, have been paid by Seller.
4.10 INVENTORIES. All of the Inventories are and will be items of a
quality usable or salable in the ordinary and usual course of business. The
value of the Inventories is set forth on Section 4.10 of the Seller Disclosure
Schedule and reflects an inventory valuation policy of Seller which is
consistent with industry practice and which is in accordance with GAAP,
consistently applied.
16
17
4.11 ACCOUNTS RECEIVABLE. All accounts receivable, notes receivable
and other receivables included in the Purchased Assets as reflected on the
Seller Disclosure Schedule are valid, genuine and fully collectible in the
aggregate amount thereof, subject to normal and customary trade discounts less
any reserves for doubtful accounts as reflected on the Seller Disclosure
Schedule.
4.12 LICENSES AND PERMITS. Seller does not hold, and is not required
by any applicable law or regulation of any Governmental Entity to hold, any
governmental licenses, registrations, permits or authorizations pertaining to
the Purchased Assets or the conduct of the Business.
4.13 EMPLOYEES.
(a) SCHEDULE 4.13 sets forth the names, home addresses,
compensation levels, share option positions, if any, and job titles of all
Employees. All employees, consultants, officers, directors and shareholders of
Seller or any of Seller's subsidiaries or Affiliates that have had access to
the Purchased Assets are parties to a written agreement (a "CONFIDENTIALITY
AGREEMENT"), under which each such person or entity (i) is obligated to
disclose and transfer to Seller, without the receipt by such person of any
additional value therefor (other than normal salary or fees for consulting
services), all inventions, developments and discoveries which, during the
period of employment with or performance of services for Seller, he or she
makes or conceives of either solely or jointly with others, that relate to any
subject matter with which his or her work for Seller may be concerned, or
relate to or are connected with the Business, products or projects of Seller,
or involve the use of the time, material or facilities of Seller, and (ii) is
obligated to maintain the confidentiality of proprietary information of Seller.
To Seller's Knowledge, none of Seller's employees, consultants, officers or
directors is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would conflict with
their obligation to promote the interests of Seller or, with respect to the
Transferred Employees, Buyer with regard to the Business or the Purchased
Assets or that would conflict with the Business or the Purchased Assets. To
Seller's Knowledge, neither the execution nor the delivery of this Agreement,
nor the carrying on of the Business by its employees and consultants or, with
respect to the Transferred Employees, by Buyer, will conflict with or result in
a breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any of such persons or
entities are now obligated. It is currently not necessary nor will it be
necessary for Seller or, to the extent that it carries on the Business as the
Business has been conducted prior to the Closing Date, for Buyer to utilize in
the Business any inventions of any of such persons or entities (or people it
currently intends to hire) made or owned prior to their employment by or
affiliation with Seller, nor is it or will it be necessary to utilize any other
assets or rights of any such persons or entities (or people it currently
intends to hire) made or owned prior to their employment with or engagement by
Seller, in violation of any registered patents, trade names, trademarks or
copyrights or any other limitations or restrictions to which any such persons
17
18
or entity is a party or to which any of such assets or rights may be subject.
To Seller's Knowledge, none of Seller's employees, consultants, officers or
directors who has had knowledge or access to information relating to the
Purchased Assets has taken, removed or made use of any proprietary
documentation, manuals, products, materials, or any other tangible item from
his or her previous employer relating to the Purchased Assets by such previous
employer which has resulted in Seller's access to or use of such proprietary
items included in the Purchased Assets, and, to Seller's Knowledge, Seller will
not gain access to or make use of any such proprietary items in the Business,
except to the extent that any such activities would not have a Material Adverse
Effect on the Purchased Assets or the Business.
(b) Seller is not a party to a collective bargaining
agreement with any trade union, Seller's employees are not members of a trade
union certified as a bargaining agent with Seller and no proceedings to
implement any such collective bargaining agreement or certifications are
pending.
(c) No present or former employee, consultant or contractor
to Seller or any Seller Affiliate holds any rights of ownership in any
Purchased Asset.
4.14 EMPLOYEE BENEFIT AND COMPENSATION PLANS. Buyer will incur no
liability with respect to, or on account of, and Seller will retain any
liability for, and on account of, any employee benefit plan of Seller, any of
its Affiliates or any predecessor employer of any employee, including, but not
limited to, liabilities to such employees under all employee benefit schemes,
incentive compensation plans, bonus plans, pension and retirement plans,
vacation, profit-sharing plans (including any profit-sharing plan with a
cash-or-deferred arrangement) share purchase and option plans, savings and
similar plans, medical, dental, travel, accident, life, disability and other
insurance and other plans or arrangements, whether written or oral and whether
"qualified" or "non-qualified," or to any employee as a result of termination
of employment by Seller as contemplated by this Agreement. Seller has complied
with all of its obligations (including obligations to make contributions) in
respect of the pension funds of which its employees are members, there is no
outstanding liability of Seller or any of its Affiliates to any such funds and
all such funds are fully funded to meet all potential claims for benefits by
any and all such employees and any former employee.
4.15 COMPLIANCE WITH LAW. The operation of the Business has been
conducted in all material respects in accordance with all applicable laws,
regulations and other requirements of Governmental Entities having jurisdiction
over the same.
4.16 ENVIRONMENTAL.
(a) Seller's operation of the Business and ownership of the
Purchased Assets are, and have been, in compliance in all material respects
with all applicable environmental laws, permit requirements, use restrictions,
and waste control requirements, and no releases of any hazardous substance
requiring notification to a Governmental Entity have occurred on or in the
vicinity of any of the Purchased Assets or any plants, offices, land,
manufacturing or other facilities currently or formerly owned, operated,
leased, managed, used, controlled or occupied by Seller in connection with the
Business (the "Facilities"); and no hazardous substances are used on or in the
18
19
vicinity of any of the Purchased Assets or the Facilities, except in compliance
in all material respects with applicable law. There is no environmental action,
suit, proceeding or investigation pending, or, to Seller's Knowledge,
threatened against or affecting any of the Purchased Assets or the Facilities
which could materially and adversely affect the Business or the Purchased
Assets or the Facilities, and no governmental entity has served upon Seller any
notice claiming any outstanding violation of any environmental statute,
ordinance or regulation or noting the need for any repair or redemption with
respect to the Purchased Assets or the Facilities, requesting data or access,
requiring testing or other investigation relating to environmental conditions,
or requiring any change in the Purchased Assets or the Facilities or in
Seller's means or methods of conducting the Business.
(b) For purposes of this Agreement, the term "HAZARDOUS
SUBSTANCE" shall mean any substance which is listed or otherwise defined as
"hazardous" or "toxic" under applicable law; as well as any petroleum product
or nuclear materials; and the term "APPLICABLE LAW" as used in this Section
4.16 shall include any local, state, federal and/or foreign laws and
regulations that govern the existence and/or remedy of contamination on
property, the protection of the environment from contamination, the control of
hazardous wastes, or other activities involving hazardous substances, including
building materials.
4.17 LITIGATION; OTHER CLAIMS.
(a) There are no claims, actions, suits, inquiries,
proceedings, or investigations against Seller, or any of its officers,
directors or shareholders, relating to the Business, the Purchased Assets or
Seller's employees which are currently pending or, to Seller's Knowledge,
threatened, at law or in equity or before or by any Governmental Entity, or
which challenges or seeks to prevent, enjoin, alter or materially delay any of
the transactions contemplated hereby, nor is Seller aware of any basis for such
claims, actions, suits, inquiries, proceedings, or investigations; and no
Governmental Entity has at any time challenged or questioned the legal right of
Seller to manufacture, offer or sell any of its products or services in the
present manner or style thereof.
(b) There are no grievance or arbitration proceedings pending
or threatened, and there are no actual or threatened strikes or work stoppages
with respect to the Business, the Purchased Assets or Seller's employees, nor
is Seller aware of any basis for such proceedings or events.
4.18 DEFAULTS. Seller is not in default under or with respect to any
judgment, order, writ, injunction or decree of any court or any Governmental
Entity which could reasonably be expected to have a Material Adverse Effect on
the Business or any of the Purchased Assets. There does not exist any default
by Seller or, to Seller's Knowledge, by any other Person, or event that, with
notice or lapse of time, or both, would constitute a default, under any
agreement entered into by Seller as part of the operations of the Business
which could reasonably be expected to have a Material Adverse Effect on the
Business or the Purchased Assets, and no notices of breach thereof have been
received by Seller.
19
20
4.19 SCHEDULES. The schedules describing the Purchased Assets are
complete and accurate and describe the assets in the possession of, or used by
Seller in connection with the Business. The property listed in such Schedules
constitutes all of the tangible and intangible property necessary for the
conduct by Seller of the Business.
4.20 FULL DISCLOSURE. Seller is not aware of any facts pertaining to
the Purchased Assets which affect the Business or the Purchased Assets in a
materially adverse manner or which will in the future affect the Business or
the Purchased Assets in a materially adverse manner. Neither this Agreement nor
any other agreement, exhibit, schedule or officer's certificate being entered
into or delivered pursuant to this Agreement contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make
the statements contained in such document not misleading.
4.21 BROKERS AND FINDERS. Neither Seller nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fee, commission or finder's fee in connection with
the transactions contemplated by this Agreement.
4.22 BUSINESS. From December 31, 1998 to the date of this Agreement,
there has not been any material adverse change in the Business, or in the
condition, financial or otherwise, of the Business, or in the Purchased Assets,
or any damage, destruction or loss, whether or not covered by insurance, which
has materially adversely affected the Business or the Purchased Assets. As of
the Closing Date, there shall have been no material adverse change in Seller's
ability to operate the Business on the Closing Date as compared with such
ability on the date of this Agreement.
4.23 YEAR 2000. The current versions of Darwin, including, without
limitation, any time-and-date-related codes, data entry features and internal
subroutines thereof, are designed (a) to automatically accommodate the change
in the date from December 31, 1999 to January 1, 2000 without negatively
affecting Darwin's performance; and (b) to accurately accept, reflect and
calculate all dates that are relevant to Darwin's performance, PROVIDED THAT
all products (for example, hardware, software and firmware) used with the
Purchased Assets properly exchange date data with the Purchased Assets.
4.24 FAIR CONSIDERATION; NO FRAUDULENT CONVEYANCE. The sale of the
Purchased Assets pursuant to this Agreement is made in exchange for fair and
equivalent consideration. Based on the amount of the Initial Payment, at the
time of transfer and obligation incurred under this Agreement, Seller will not
be insolvent, as that term is defined under applicable fraudulent transfer law,
and will not be rendered insolvent by the sale, transfer and assignment of the
Purchased Assets pursuant to the terms of this Agreement. Seller is not
entering into this Agreement or any of the other agreements referenced in this
Agreement with the intent to defraud, delay or hinder its creditors and the
consummation of the transactions contemplated by this Agreement, and the other
agreements referenced in this Agreement, will not have any such effect. The
transactions contemplated in this Agreement or any agreements referenced in
this Agreement will not constitute a fraudulent conveyance, or otherwise give
rise to any right of any creditor of Seller to any of the Purchased Assets
after the Closing.
20
21
4.25 INSURANCE. The Seller Disclosure Schedule lists all insurance
policies and fidelity bonds covering the Purchased Assets. There is no claim by
Seller pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such policies and
bonds. All premiums due and payable under all such policies and bonds have been
paid and Seller is otherwise in material compliance with the terms of such
policies and bonds (or other policies and bonds providing substantially similar
insurance coverage). There is no threatened termination of, or material premium
increase with respect to, any of such policies.
4.26 BULK SALES LAW. Seller is not required to make any Bulk Sales Law
filings in connection with the transaction contemplated in this Agreement or
any agreements referenced in this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
5.1 ORGANIZATION. Buyer is a corporation duly formed and validly
existing under the laws of Delaware and has full corporate power and authority
and the legal right to execute and deliver this Agreement and all of the other
agreements and instruments to be executed and delivered by Buyer pursuant
hereto, and to consummate the transactions contemplated hereby and thereby.
5.2 AUTHORITY. The execution and delivery of this Agreement (and all
other agreements and instruments contemplated hereunder) by Buyer, the
performance by Buyer of its obligations hereunder and thereunder, and the
consummation by Buyer of the transactions contemplated hereby and thereby have
been duly authorized by all necessary action by the Board of Directors of
Buyer, and no other act or proceeding on the part of Buyer or its stockholders
is necessary to approve the execution and delivery of this Agreement and such
other agreements and instruments, the performance by Buyer of its obligations
hereunder and thereunder and the consummation of the transactions contemplated
hereby and thereby. The signatory officers of Buyer have the power and
authority to execute and deliver this Agreement and all of the other agreements
and instruments to be executed and delivered by Buyer pursuant hereto, to
consummate the transactions hereby and thereby contemplated and to take all
other actions required to be taken by Buyer pursuant to the provisions hereof
and thereof.
5.3 EXECUTION AND BINDING EFFECT. This Agreement has been duly and
validly executed and delivered by Buyer and constitutes, and the other
agreements and instruments to be executed and delivered by Buyer pursuant
hereto, upon their execution and delivery by Buyer, will constitute (assuming,
in each case, the due and valid authorization, execution and delivery thereof
by Seller), legal, valid and binding agreements of Buyer, enforceable against
Buyer in accordance with their respective terms, except as enforceability may
be limited by bankruptcy, insolvency, moratorium, or other laws affecting the
enforcement of creditors' rights generally or provisions limiting competition,
and by equitable principles.
21
22
5.4 CONSENT AND APPROVALS. There is no requirement applicable to Buyer
to make any filing, declaration or registration with, or to obtain any permit,
authorization, consent or approval of, any Governmental Entity as a condition
to the lawful consummation by Buyer of the transactions contemplated by this
Agreement and the other agreements and instruments to be executed and delivered
by Buyer pursuant hereto, except for filings the failure of making which would
not have a Material Adverse Effect on the transactions contemplated hereby.
5.5 NO VIOLATION. Neither the execution, delivery and performance of
this Agreement and of all the other agreements and instruments to be executed
and delivered pursuant hereto, nor the consummation of the transactions
contemplated hereby or thereby, will, with or without the passage of time or
the delivery of notice or both, (a) conflict with, violate or result in any
breach of the terms, conditions or provisions of the Certificate of
Incorporation or Bylaws of Buyer, (b) conflict with or result in a violation or
breach of, or constitute a default or require consent of any Person (or give
rise to any right of termination, cancellation or acceleration) under, any of
the terms, conditions or provisions of any notice, bond, mortgage, indenture,
license, franchise, permit, agreement, lease or other instrument or obligation
to which Buyer is a party or by which Buyer or any of its properties or assets
may be bound, where such conflict, violation, breach, default or consent would
have a Material Adverse Effect on the business or assets of the Buyer, or (c)
violate any statute, ordinance or law or any rule, regulation, order, writ,
injunction or decree of any Governmental Entity applicable to Buyer or by which
any of its properties or assets may be bound where such violation would have a
Material Adverse Effect on the business or assets of the Buyer.
6. COVENANTS.
6.1 ACCESS TO INFORMATION.
(a) Prior and subsequent to the Closing, Seller will permit
Buyer to make a full and complete investigation of the Purchased Assets and to
receive from Seller all information of Seller relating to the Purchased Assets
or reasonably related to Seller's conduct of the Business, subject to the
confidentiality obligations of Buyer prior to the Closing set forth in Section
6.18 hereof. Without limiting this right, Seller will give to Buyer and its
accountants, legal counsel, and other representatives full access, during
normal business hours, at a mutually agreeable location arranged in advance, to
all of the books, records, files, documents, properties, and contracts of
Seller relating to the Purchased Assets or reasonably related to Seller's
conduct of the Business, subject to the confidentiality obligations of Buyer
prior to the Closing set forth in Section 6.18 hereof, and allow Buyer and any
such representatives to make copies thereof, all of which shall be made
available in an organized fashion and so as to facilitate an orderly review.
This Section 6.1 shall not affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the parties
to consummate the transactions contemplated by this Agreement. Seller shall
maintain and make available the information and records specified in this
Section 6.1(a) in the ordinary course of Seller's business and document
retention policies, as if the transactions contemplated by this Agreement had
not occurred.
22
23
(b) At all times following the Closing, each party shall
provide the other party (at such other party's expense) with such reasonable
assistance, including the provision of available relevant records or other
information and reasonable access to and cooperation of any employees, as may
be reasonably requested by either of them in connection with the preparation of
any financial statement or tax return, any audit or examination by any taxing
authority, or any judicial or administrative proceeding relating to liability
for Taxes.
6.2 THIRD PARTY CONSENTS. Seller and Buyer shall use commercially
reasonable efforts to obtain, within the applicable time periods required, all
Required Consents, waivers, permits, consents and approvals and to effect all
registrations, filings and notices with or to third parties or Governmental
Entities which are necessary to consummate the transactions contemplated by
this Agreement so as to preserve all rights of, and benefits to, the Buyer in
the Purchased Assets.
6.3 CERTAIN NOTIFICATIONS. At all times prior to the Closing, Seller
and Buyer shall promptly notify the other party in writing of the occurrence of
any event which will result, or has a reasonable prospect of resulting, in the
failure to satisfy any of the conditions specified in Section 8 or Section 9 of
this Agreement.
6.4 COMMERCIALLY REASONABLE EFFORTS. Seller shall use commercially
reasonable efforts (i) to cause to be fulfilled and satisfied all of the
conditions to the Closing set forth in Section 8 below, (ii) to cause to be
performed all of the matters required of it at the Closing and (iii) to cause
the Transferred Agreements to be assigned to Buyer.
6.5 SELLER'S CONDUCT OF THE BUSINESS PRIOR TO CLOSING. During the
period from the date of this Agreement to the Closing Date, Seller will conduct
the Business in its ordinary and usual course, consistent with past practice,
and will use all reasonable efforts to preserve intact all rights, privileges,
franchises and other authority of the Business, to retain the employees
associated with the Business, and to maintain favorable relationships with
licensors, licensees, suppliers, contractors, distributors, customers, and
others having relationships with the Business. Seller shall promptly notify
Buyer of any event or occurrence or emergency not in the ordinary course of
business, and any material event involving the Business or the Purchased
Assets. Without limiting the generality of the foregoing, and except as
approved in writing by Buyer in advance, prior to the Closing, Seller:
(a) will not sell, dispose of or encumber any of the
Purchased Assets or license any Purchased Assets to any Person except for
end-user, nonexclusive object code licenses entered into in the normal course
of business consistent with past practice;
(b) will not engage in any special promotion which promotes
the licensing of the Purchased Assets with highly discounted terms;
23
24
(c) will not enter into any agreements or commitments
relating to the Business, except on commercially reasonable terms in the
ordinary course of business of the Business;
(d) will comply in all material respects with all laws and
regulations applicable to the Business;
(e) will not enter into any agreement with any third party
for the distribution of any of the Purchased Assets;
(f) will not change, other than product development in the
ordinary course of business, or announce any change to the products or services
sold by the Business except with Buyer's written consent or at Buyer's request;
(g) will not willfully violate (and will use all commercially
reasonable efforts not to otherwise violate), amend or otherwise change in any
way the terms of any of the Contracts;
(h) will not commence a lawsuit related to or involving the
Purchased Assets other than (i) for the routine collection of bills; (ii) for
injunctive relief on the grounds that Seller has suffered immediate and
irreparable harm not compensable in money damages, provided that Seller has
obtained the prior written consent of Buyer, such consent not to be
unreasonably withheld; or (iii) for a breach of this Agreement;
(i) will not assign, sell or otherwise convey to any third
party, without obtaining Buyer's prior written consent, any of its accounts
receivable prior to the Closing Date;
(j) will not create, incur or assume (i) any borrowings under
capital leases, or (ii) any obligation which would in any material way affect
the Business, the Purchased Assets or Buyer's ability to conduct the Business
in substantially the same manner and condition as conducted by Seller on the
date of this Agreement (provided, however, that Seller may continue to borrow
money from its Affiliate New Valley Corporation under its existing line of
credit with such corporation);
(k) will not change in any manner the compensation of, or
agree to provide additional benefits to, or enter into any employment agreement
with, any employee;
(l) will maintain insurance coverage in amounts adequate to
cover the reasonably anticipated risks of the business conducted with the
Purchased Assets;
(m) will not acquire or agree to acquire by merging or
consolidating with, or by purchasing any assets or equity securities of, or by
any other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or agree
to acquire any assets which are material, individually or in the aggregate, to
the Business;
24
25
(n) will use reasonable efforts to assist Buyer in employing
after the Closing Date those employees to whom offers of employment are made by
Buyer, and will not (and will cause its Affiliates not to) solicit such
employees to remain in the employ of Seller or any of its Affiliates after the
Closing Date; and
(o) will not expand the use of the Purchased Assets within
the organization of Seller.
6.6 NO OTHER BIDS. Until the earlier to occur of (a) the Closing or
(b) the termination of this Agreement pursuant to its terms, Seller shall not,
and Seller shall not authorize any of its officers, directors, employees or
other representatives to, directly or indirectly, (i) initiate, solicit or
encourage (including by way of furnishing information regarding the Business or
the Purchased Assets) any inquiries, or make any statements to third parties
which may reasonably be expected to lead to any proposal concerning the sale of
Seller, the Business or the Purchased Assets (whether by way of merger,
purchase of capital shares, purchase of assets or otherwise), or (ii)
negotiate, engage in any substantive discussions, or enter into any agreement,
with any Person concerning the sale of all or any part of the Business or the
Purchased Assets (whether by way of merger, purchase of capital shares,
purchase of assets or otherwise).
6.7 TAX RETURNS. Seller shall, to the extent that failure to do so
could adversely affect the Business or the Purchased Assets following Closing,
(a) continue to file in a timely manner all returns and reports relating to
Taxes, and such returns and reports shall be true, correct and complete and
shall be subject to the review and consent of Buyer which consent shall not be
unreasonably withheld, and (b) be responsible for and pay when due any and all
Taxes.
6.8 POST-CLOSING ACCESS TO INFORMATION. If, after the Closing Date, in
order properly to operate the Business or prepare documents or reports required
to be filed with governmental authorities or Buyer's financial statements, it
is necessary that Buyer obtain additional information within Seller's
possession relating to the Purchased Assets or the Business, Seller will
furnish or cause its representatives to furnish such information to Buyer to
the extent it is available or can be obtained through commercially reasonable
efforts. Such information shall include, without limitation, all agreements
between Seller and any Person relating to the Business. Seller shall maintain
and make available, or cause to be maintained and made available, the
information and records specified in this Section 6.8 for a period of five (5)
years after the Closing Date.
6.9 POST-CLOSING COOPERATION. Seller agrees that, if reasonably
requested by Buyer, it will cooperate with Buyer, at Buyer's expense, in
enforcing the terms of any agreements between Seller and any third party
involving the Business, including without limitation terms relating to
confidentiality and the protection of Intellectual Property Rights. In the
event that Buyer is unable to enforce its Intellectual Property Rights against
a third party as a result of a rule or law barring enforcement of such rights
by a transferee of such rights, Seller agrees to reasonably cooperate with
Buyer by assigning to Buyer such rights as may be required by Buyer to enforce
its Intellectual Property Rights in its own name. If such assignment still does
not permit Buyer to enforce its Intellectual Property Rights against the third
25
26
party, then Seller agrees to initiate proceedings against such third party in
Seller's name, provided that Buyer shall be entitled to participate in such
proceedings and; provided further that Buyer shall be responsible for the
expenses of such proceedings.
6.10 NO POST-CLOSING RETENTION OF COPIES. Immediately after the
Closing, Seller shall deliver to Buyer or destroy copies of Purchased Assets in
Seller's possession that are in addition to copies delivered to Buyer as part
of the Closing, whether such copies are in paper form, on computer media or
stored in another form.
6.11 PUBLIC ANNOUNCEMENTS. On and prior to the Closing Date, Buyer and
Seller shall advise and confer with each other prior to the issuance of any
reports, statements or releases concerning this Agreement (including the
exhibits and schedules hereto) and the transactions contemplated herein.
Neither Buyer nor Seller will make any public disclosure prior to the Closing
or with respect to the Closing unless both parties agree on the text and timing
of such public disclosure; PROVIDED, HOWEVER, that nothing contained herein
shall prevent either party at any time from furnishing any information to any
Governmental Entity.
6.12 POST-CLOSING ACTIONS. Subsequent to the Closing Date, Seller
shall, from time to time, execute and deliver, upon the request of Buyer, all
such other and further materials and documents and instruments of conveyance,
transfer or assignment as may reasonably be requested by Buyer to effect,
record or verify the transfer to, and vesting in Buyer, of Seller's right,
title and interest in and to the Purchased Assets, free and clear of all Liens,
in accordance with the terms of this Agreement.
6.13 FUTURE AGREEMENTS. In the event Seller enters into any material
agreement between the date of this Agreement and the Closing that relates
primarily to the Business, at the request of Buyer, Seller agrees to include
any such agreement within the Transferred Agreements.
6.14 NON-COMPETITION AGREEMENT.
(a) In consideration of the Buyer entering into this
Agreement, Seller undertakes that through a three (3) year period after the
Closing Date and anywhere in the world (the "TERRITORY") neither it nor any
Affiliate (other than the Affiliates listed on SCHEDULE 6.14 (A)) of it will:
(i) participate, assist or otherwise be directly or
indirectly involved or concerned, financially or otherwise, as a member,
shareholder, unitholder, director, consultant, adviser, contractor, principal,
agent, manager, beneficiary, partner, associate, trustee, financier or
otherwise in any business or activity which is the same as or substantially
similar to the Business or any material part of it (a "RESTRICTED BUSINESS");
(ii) solicit, canvass, induce or encourage directly
or indirectly any employee of Buyer to leave the employment of Buyer;
26
27
(iii) solicit, canvass, approach or accept any offer
from any person or entity who was at any time during the 24 months immediately
preceding the Closing Date a customer or supplier of the Business with a view
to establishing a relationship with or obtaining the patronage of that person
or entity in a Restricted Business;
(iv) interfere or seek to interfere, directly or
indirectly, with any relationship between Buyer and any client, customer,
employee or supplier of the Business.
(b) If any of the separate and independent covenants and
restraints referred to in clause (a) of this Section 6.14 are or become invalid
or unenforceable for any reason then that invalidity or unenforceability will
not affect the validity or enforceability of any other separate and independent
covenants and restraints.
(c) If any prohibition or restriction contained in clause (a)
of this Section 6.14 is judged to go beyond what is reasonable in the
circumstances, but would be judged reasonable if that activity was deleted or
that period or area was reduced, then the prohibitions or restrictions apply
with that activity deleted or period or area reduced by the minimum amount
necessary.
(d) Seller acknowledges that:
(i) the prohibitions and restrictions contained in
clause (a) of this Section 6.14 are reasonable and necessary; and
(ii) Seller has received valuable consideration for
agreeing to the covenants in clause (a) of this Section 6.14.
(e) Seller and Buyer acknowledge and agree that it will be
difficult to compute the amount of damage or loss to Buyer if Seller violated
any of their agreements under this Section 6.14, that Buyer will be without an
adequate legal remedy if Seller violated the provisions of this Section 6.14,
and that any such violation may cause substantial irreparable injury and damage
to Buyer not fully compensable by monetary damages. Therefore, Seller and Buyer
agree that in the event of any violation by Seller of this Section 6.14, Buyer
shall be entitled (i) to recover from Seller monetary damages (subject to the
limitations of Section 10 hereof), (ii) to obtain specific performance,
injunctive or other equitable relief, of either a preliminary or permanent
type, and (iii) to seek any other available rights or remedies at law or in
equity which may be exercised concurrently with the rights granted hereunder.
6.15 PERMITS. Seller will assist Buyer in obtaining any licenses,
permits or authorizations required for carrying on the Business but which are
not transferable.
6.16 TAXES. Seller shall be responsible for paying, shall promptly
discharge when due, and shall reimburse, indemnify and hold harmless Buyer
from, any sales or use, transfer, real property gains, excise, stamp, or other
similar Taxes arising from, imposed on or attributable to the transactions
contemplated by this Agreement.
27
28
6.17 CONFIDENTIALITY. The Confidential Disclosure Agreement for
Strategic Matters dated March 8, 1999 between Buyer and Seller is hereby
incorporated by reference into this Agreement and shall survive any termination
of this Agreement.
6.18 REIMBURSEMENT FOR EXPENSES. Buyer agrees that it will reimburse
Seller at Closing for an amount equal to Seller's costs and expenses relating
to the Business and incurred in the ordinary course of business from and after
the date which commences fourteen (14) calendar days after execution of this
Agreement (such initial fourteen day period, the "Seller's Expense Period") and
through the Closing; provided, however, that: (i) Buyer's obligations shall in
no circumstances exceed an aggregate of $140,000 for each successive seven day
period commencing after the Seller's Expense Period and ending on or before the
Closing (provided that such maximum amount shall be prorated for any partial
seven day period ending on or prior to the Closing); (ii) Buyer's obligations
shall only apply with respect to expenses or costs that Seller can demonstrate
by written evidence have been expended during such period (such payment
obligation, the "Reimbursement Obligation"); (iii) the Reimbursement Obligation
shall be limited to reimbursement for salary expense, payroll taxes, health,
dental and general business insurance, telephone expense, temporary workers and
consultants, travel and entertainment expense, service and maintenance expense,
marketing expense, shipping expense, rental expense, and reasonable
miscellaneous expenses not to exceed $7,000 in any seven day period commencing
after the Seller's Expense Period; and (iv) Buyer shall have no obligation to
pay such Reimbursement Obligation in the event this Agreement is terminated
pursuant to Section 11 hereof. Seller shall deliver a certificate of the Chief
Financial Officer and Chief Executive Officer certifying that the written
evidence supporting the Reimbursement Obligation is true and correct as of the
Closing Date.
6.19 NO FUTURE IMPEDIMENT TO BUYER'S USE OF DARWIN. Seller will not
enforce any Intellectual Property Rights obtained in the future so as to limit
Buyer's use of Darwin, any new version of Darwin, or successor version of
Darwin.
6.20 POST-CLOSING TERMINATION OF CERTAIN NON-TRANSFERRED AGREEMENTS.
As soon as practicable following the Closing, Seller agrees to terminate all
agreements listed on Schedule 4.8(a)(ii) that are not Transferred Agreements or
already expired pursuant to their terms.
6.21 DELIVERY OF LICENSE AGREEMENTS. Seller shall use commercially
reasonable efforts to deliver to Buyer, within 45 days following the Closing,
license agreements, containing Buyer's standard terms, relating to purchase
orders with the following customers: Axios Data Analysis Systems Corporation
and Omnitel Pronto Italia S.p.A. Upon Buyer's review, and approval, such
licenses shall be assigned to Buyer.
7. EMPLOYEE MATTERS
7.1 TRANSFERRED EMPLOYEES.
(a) OFFER OF EMPLOYMENT. Subject to and in accordance with
the provisions of this Section 7, Buyer may offer employment to any or all of
the employees who are employed by Seller in the Business as of the date of this
28
29
Agreement (the "EMPLOYEES"). Seller agrees that it will cooperate with Buyer to
identify those employees of Seller who are necessary for the conduct the
Business. Prior to the Closing, Buyer, after notice to Seller as to the timing
and method of contact, shall have the right to contact any or all of the
Employees for the purposes of making offers of employment with Buyer (or any
Affiliate designated by Buyer) after the Closing Date and receiving written
acceptances of such employment (in each case contingent on consummation of the
transactions contemplated by this Agreement). Upon Closing, Buyer (or any
Affiliates designated by Buyer) shall hire those Employees to whom it has made
an offer in accordance with this Section 7.1 and who accept such offer in the
manner and within the time frame reasonably established by Buyer. Each such
Employee who is employed by Seller on the Closing Date and who actually
transfers to employment with Buyer (or any Affiliate designated by Buyer) at or
after the Closing Date as a result of an offer of employment made by Buyer is
hereafter referred to as a "TRANSFERRED EMPLOYEE." Transferred Employees shall
not include any person on a disability leave of more than twenty-six (26)
weeks. On a periodic basis following the date of this Agreement and prior to
the Closing, Buyer shall advise Seller of its intentions with respect to the
employees it desires to extend or has extended offers to and the general status
of discussions with such employees. Notwithstanding such periodic disclosures
made to Seller, Buyer shall not be obligated to hire any employee unless an
offer of employment is subsequently made to, and accepted by, such employee; in
addition, Buyer shall have no obligation to hire any employees of Seller after
the Closing Date.
(b) TRANSITION. The employment by Seller of the Transferred
Employees shall end at the close of business on the Closing Date and the
employment of the Transferred Employees by Buyer shall commence at 12:01 a.m.
on the day after the Closing Date. The terms of employment with Buyer (or
Buyer's Affiliates) shall be as mutually agreed to between each Transferred
Employee and Buyer (or Buyer's Affiliate, as the case may be), subject to the
provisions of this Section 7.1. Between the date of this Agreement and the
Closing Date, Seller will provide each Transferred Employee with the same level
of compensation as that currently provided by Seller. Buyer shall have no
obligation with respect to payments of salary, compensation, wages, health or
similar benefits, commissions, bonuses (deferred or otherwise), severance,
stock or stock options or any other sums due to any Transferred Employee that
accrued before the Closing Date. Seller will be fully responsible for all
amounts payable to any employee, including (without limitation) all termination
payments, redundancy compensation, severance pay, accrued vacation pay and
other amounts payable in respect of the termination of employment of any
employee in connection with the sale of the Purchased Assets to the Buyer. In
addition, Seller will be fully responsible for all amounts owing to Transferred
Employees prior to Closing.
(c) RETENTION OF EMPLOYEES PRIOR TO CLOSING. Seller agrees to
use reasonable efforts to retain the Employees as employees of the Business
until the Closing Date, and to assist Buyer in securing the employment after
the Closing Date of those Employees to whom Buyer (or Affiliate designated by
Buyer) makes or intends to make offers of employment under subsection (a)
above. Seller shall not transfer any Employee to employment with Seller outside
29
30
of the Business prior to the Closing or without the consent of Buyer. Seller
shall notify Buyer promptly if, notwithstanding the foregoing, any Employee
terminates employment with Seller after the date of this Agreement but prior to
the Closing.
7.2 COMPENSATION AND BENEFITS OF TRANSFERRED EMPLOYEES. Coverage for
Transferred Employees under Buyer's compensation and benefit plans and other
programs shall commence as of 12:01 a.m. on the day after the Closing Date.
Buyer shall be free to establish its own employee benefit plans; Buyer shall
have no obligation to offer benefit plans of the same type or with terms
similar to or better than the terms of Seller's current employee benefit plans.
To the extent permitted by Buyer's benefit programs, Buyer shall use reasonable
efforts to give each Transferred Employee credit for such Transferred
Employee's years of most recent continuous service with Seller (and its
predecessor) for purposes of determining participation and benefit levels under
all of Buyer's vacation policies and benefit plans and programs.
7.3 OTHER EMPLOYEES OF THE BUSINESS. With respect to each employee of
the Business as of the Closing Date who is not a Transferred Employee (each a
"NON-TRANSFERRED EMPLOYEE"), Seller agrees to either terminate such
Non-Transferred Employee's employment with Seller, effective prior to the
Closing or offer such Non-Transferred Employee continued employment with Seller
other than in the Business. Seller further acknowledges that the
Non-Transferred Employees shall not be employees of Buyer after the Closing.
7.4 NO RIGHT TO CONTINUED EMPLOYMENT OR BENEFITS. No provision in this
Agreement shall create any third party beneficiary or other right in any Person
(including any beneficiary or dependent thereof) for any reason, including,
without limitation, in respect of continued, resumed or new employment with
Seller or Buyer (or any Affiliate of Seller or Buyer) or in respect of any
benefits that may be provided, directly or indirectly, under any plan or
arrangement maintained by Seller, Buyer or any Affiliate of Seller or Buyer.
Except as otherwise expressly provided in this Agreement, Buyer is under no
obligation to hire any employee of Seller, provide any employee with any
particular benefits, or make any payments or provide any benefits to those
employees of Seller whom Buyer chooses not to employ.
7.5 NO SOLICITATION OR HIRE BY SELLER. For a period of one year after
the Closing, Seller will not solicit any Transferred Employee for employment.
For purposes of this Section 7.5, the term "solicit" shall not include the
following activities by Seller: (i) advertising for employment in any bulletin
board (including electronic bulletin boards), newspaper, trade journal or other
publication available for general distribution to the public without specific
reference to any particular employees; (ii) participation in any hiring fair or
similar event open to the public not targeted at Buyer's employees; and (iii)
use of recruiting or employee search firms that have been instructed by Seller
not to target any Transferred Employee.
8. CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer under this Agreement are subject to the
fulfillment, prior to or on the Closing Date, of each of the following
conditions, all or any of which may be waived by Buyer in writing, except as
otherwise provided by law:
30
31
8.1 REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE; CERTIFICATE.
(a) The representations and warranties of Seller contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date with the same effect as though such representations and warranties
had been made or given again at and as of the Closing Date;
(b) Seller shall have performed and complied in all material
respects with all of its agreements, covenants and conditions required by this
Agreement to be performed or complied with by them prior to or on the Closing
Date;
(c) The conditions set forth in this Section 8 shall have
been fulfilled or satisfied, unless otherwise waived in writing by Buyer; and
(d) Buyer shall have received a certificate, dated as of the
Closing Date, signed and verified by an officer of Seller on behalf of Seller
certifying to the matters set forth in Sections 8.1(a), 8.1(b) and 8.1(c)
above.
8.2 CONSENTS. All Governmental Authorizations, Required Consents and
consents required to transfer the Transferred Agreements to Buyer on the terms
and conditions provided to Seller, without change as a result of the transfer
to Buyer, shall have been obtained. The Required Consent provided by New Valley
Corporation shall also contain an acknowledgment that the sale of the Purchased
Assets pursuant to this Agreement is made in exchange for fair and equivalent
consideration.
8.3 NO PROCEEDINGS OR LITIGATION.
(a) No preliminary or permanent injunction or other order
shall have been issued by any Governmental Entity, nor shall any statute, rule,
regulation or executive order be promulgated or enacted by any Governmental
Entity which prevents the consummation of the transactions contemplated by this
Agreement.
(b) No suit, action, claim, proceeding or investigation
before any Governmental Entity shall have been commenced and be pending against
any of the parties, or any of their respective Affiliates, associates, officers
or directors, seeking to prevent transactions contemplated by this Agreement,
including, without limitation, the sale of the Purchased Assets or asserting
that the sale of the Purchased Assets would be illegal or create liability for
damages or which may have a Material Adverse Effect on the Business or the
Purchased Assets.
8.4 DOCUMENTS. This Agreement, the exhibits and schedules attached
hereto, and any other instruments of conveyance and transfer and all other
documents to be delivered by Seller at the Closing and all actions of Seller
required by this Agreement and the exhibit agreements, or incidental thereto,
and all related matters, shall be in form and substance reasonably satisfactory
to Buyer and Buyer's counsel and shall be in full force and effect.
31
32
8.5 GOVERNMENTAL FILINGS. The parties shall have made any required
filing with Governmental Entities in connection with this Agreement and the
exhibit agreements, and any approvals related thereto shall have been obtained
or any applicable waiting periods shall have expired. If a proceeding or review
process by a Governmental Entity is pending in which a decision is expected,
Buyer shall not be required to consummate the transactions contemplated by this
Agreement until such decision is reached or rendered, notwithstanding Buyer's
legal ability to consummate the transactions contemplated by this Agreement
prior to such decision being reached or rendered.
8.6 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the financial condition or results of operations of the
Business on the Closing Date as compared with the date of this Agreement.
8.7 EMPLOYEES. Buyer shall have received firm employment commitments
from Employees that Buyer, in its sole discretion, deems to be sufficient in
number, seniority and quality.
8.8 LEGAL OPINIONS. Buyer shall have received a legal opinion from
Hill & Xxxxxx, legal counsel to Seller, dated the Closing Date, in a form
satisfactory to Buyer.
8.9 SHAREHOLDER APPROVAL. This Agreement and the transactions it
contemplates shall have been approved and adopted by such vote of the holders
of the outstanding shares of Seller's capital stock entitled to vote thereon as
is required to approve such transactions, and shall have otherwise been
approved as required by law and the charter documents of Seller.
8.10 ESCROW AGREEMENT. Buyer and Seller shall have entered into an
Escrow Agreement in substantially the form attached hereto as EXHIBIT A, and
such agreement shall remain in full force and effect.
8.11 RELEASE OF SECURITY INTERESTS. Buyer shall have received written
evidence of the release of the following liens on the Purchased Assets: (i) New
Valley Corporation's lien pursuant to the Revolving Line of Credit and Security
Agreement dated January 26, 1999 and the Secured Promissory Note dated January
26, 1999 and (ii) EOP-New England Executive Park LLC's lien pursuant to the
Office Lease Agreement, dated September 4, 1998.
8.12 SUPPORT AGREEMENT. Buyer and Seller shall have entered into a
Support Agreement in a form that is acceptable to both parties, and such
agreement shall remain in full force and effect.
9. CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller under this Agreement are subject to the
fulfillment, prior to or on the Closing Date, of each of the following
conditions, all or any of which may be waived in writing by Seller, except as
otherwise provided by law:
32
33
9.1 REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE.
(a) The representations and warranties of Buyer contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date with the same effect as though such representations and warranties
had been made or given again at and as of the Closing Date;
(b) Buyer shall have performed and complied in all material
respects with all of its agreements, covenants and conditions required by this
Agreement to be performed or complied with by them prior to or on the Closing
Date; and
(c) Seller shall have received a certificate, dated as of the
Closing Date, signed and verified by an officer of Buyer on behalf of Buyer
certifying to the matters set forth in Sections 9.1(a) and 9.1(b) above.
(d) Seller shall have received a legal opinion from Oracle
in-house counsel, dated the Closing Date, substantially in the form attached
hereto as SCHEDULE 9.1(D).
(e) This Agreement and the transactions it contemplates shall
have been approved and adopted by such vote of the holders of outstanding
shares of Seller's Series A preferred stock, $10.00 par value, entitled to vote
thereon as is required to approve such transactions.
(f) Buyer shall have satisfied its Reimbursement Obligation.
9.2 NO PROCEEDINGS OR LITIGATION.
(a) No preliminary or permanent injunction or other order
shall have been issued by any Governmental Entity, nor shall any statute, rule,
regulation or executive order be promulgated or enacted by any Governmental
Entity which prevents the consummation of the transactions contemplated by this
Agreement.
(b) No suit, action, claim, proceeding or investigation
before any Governmental Entity shall have been commenced and be pending against
any of the parties, or any of their respective Affiliates, associates, officers
or directors, seeking to prevent the sale of the Purchased Assets or asserting
that the sale of the Assets would be illegal or create liability for damages.
9.3 DOCUMENTS. This Agreement, any other instruments of conveyance and
transfer and all other documents to be delivered by Buyer to Seller at the
Closing and all actions of Buyer required by this Agreement or incidental
thereto, and all related matters, shall be in form and substance reasonably
satisfactory to Seller and Seller's counsel.
9.4 GOVERNMENTAL FILINGS. The parties shall have made any filing
required with Governmental Entities, and any approvals shall have been obtained
or any applicable waiting periods shall have expired. If a proceeding or review
process by a Governmental Entity is pending in which a decision is expected,
Seller shall not be required to consummate the transactions contemplated by
this Agreement until such decision is reached or rendered, notwithstanding
Seller's legal ability to consummate the transactions contemplated by this
Agreement prior to such decision being reached or rendered.
33
34
10. ESCROW AND INDEMNIFICATION
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All covenants to be
performed prior to the Closing Date, and all representations and warranties in
this Agreement or in any instrument delivered pursuant to this Agreement shall
survive the consummation of the transactions contemplated hereby and continue
for a two (2) year period following the Closing Date (the "ESCROW TERMINATION
DATE"); PROVIDED that if any claims for indemnification have been asserted with
respect to any such representations, warranties and covenants prior to the
Escrow Termination Date, the representations, warranties and covenants on which
any such claims are based shall continue in effect until final resolution of
any claims, and PROVIDED, FURTHER, that representations, warranties and
covenants relating to Taxes shall survive until 30 days after expiration of all
applicable statutes of limitations relating to such Taxes. All covenants to be
performed after the Closing Date shall continue indefinitely, except with
respect to those covenants with specified terms which shall survive only for
the term of such covenant.
10.2 INDEMNIFICATION. Subject to the limitations set forth in this
Section 10, from and after the Effective Time, Seller shall protect, defend,
indemnify and hold harmless Buyer and Buyer's Affiliates, officers, directors,
employees, representatives and agents (each of the foregoing Persons is
hereinafter referred to individually as an "INDEMNIFIED PERSON" and
collectively as "INDEMNIFIED PERSONS") from and against any and all losses,
costs, damages, liabilities, fees (including without limitation reasonable
attorneys' fees) and expenses (collectively, the "DAMAGES"), that any of the
Indemnified Persons incurs or as to which any Indemnified Person has made a
specific written claim for indemnification on or prior to the Escrow
Termination Date as set forth in the Escrow Agreement, by reason of or in
connection with (i) any claim, demand, action or cause of action alleging
misrepresentation, breach of, or default in connection with, any of the
representations, warranties, covenants or agreements of the Seller contained in
this Agreement, including any exhibits or schedules attached hereto and (ii)
notwithstanding anything contained herein to the contrary, any claim, demand or
cause of action relating to any Year 2000 time-and-date related codes, data
entry features or any internal subroutines thereof with respect to any version
of Darwin delivered to Omnitel Pronto Italia S.p.A. or MCI Telecommunications
on or prior to the Closing Date in connection with (a) the Omnitel Pronto
Italia S.p.A. Purchase Order, dated September 7, 1998, and its related license
agreement, and (b) the MCI Telecommunications Software License Agreement, dated
January 21, 1999. Damages in each case shall be net of the amount of any
insurance proceeds and indemnity and contribution actually recovered by Buyer
and net of any actual net tax refunds or reductions in taxes payable by Buyer
as a result of the circumstances giving rise to the Damages.
10.3 DAMAGES THRESHOLD. Notwithstanding the foregoing, Buyer may not
receive any amount of the Escrow Consideration from the Escrow Fund unless and
until a certificate signed by an officer of Buyer (an "OFFICER'S CERTIFICATE")
identifying Damages in the aggregate amount in excess of $100,000 has been
delivered to the Escrow Agent and such amount is determined pursuant to this
34
35
Section 10 to be payable, in which case Buyer shall receive Escrow
Consideration equal in value to the full amount of such Damages without
deduction. In determining the amount of any Damages attributable to a breach,
any materiality standard contained in a representation, warranty or covenant of
Seller shall be disregarded.
10.4 ESCROW PERIOD. Subject to the following requirements, the Escrow
Consideration (or such portion thereof as is required pursuant to the Escrow
Agreement) shall be retained by the Escrow Agent until the Escrow Termination
Date. Upon the Escrow Termination Date, the Escrow Agent shall deliver to the
Seller all remaining Escrow Consideration PROVIDED, HOWEVER, that the amount of
Escrow Consideration, which, in the reasonable judgment of Buyer, subject to
the objection of the Escrow Agent, is necessary to satisfy any unsatisfied
claims specified in any Officer's Certificate delivered to the Escrow Agent
prior to the Escrow Termination Date with respect to facts and circumstances
existing on or prior to the Escrow Termination Date shall remain in the
possession of the Escrow Agent until such claims have been resolved. As soon as
all such claims have been resolved, any remaining Escrow Consideration not
required to satisfy such claims shall be distributed to the Seller.
10.5 METHOD OF ASSERTING CLAIMS. All claims for indemnification by the
Buyer or any other Indemnified Person pursuant to this Section 10 shall be made
in accordance with the provisions of the Escrow Agreement.
10.6 RIGHT TO SET OFF. Indemnifiable amounts owed Buyer by Seller
shall be, at Buyer's election, offset by or credited against future Earn-Out
Payments owed by Buyer to Seller pursuant to Section 2.4.
10.7 LIMITATION ON LIABILITY. Buyer hereby acknowledges that, from and
after the Closing, its sole and exclusive remedy for any and all claims
relating to a breach of a representation or warranty contained in this
Agreement (except for claims involving fraud), shall be pursuant to the
indemnification provisions set forth in this Section 10 and shall not exceed
the aggregate of the Initial Payment, the Escrow Consideration, plus any
Earn-Out Payments paid to Seller.
11. TERMINATION.
11.1 TERMINATION OF AGREEMENT. This Agreement may be terminated at any
time prior to the Closing:
(a) By mutual written consent of Buyer and Seller;
(b) By either party, if the other party goes into
liquidation, has an application or order made for its winding up or
dissolution, has a resolution passed or steps taken to pass a resolution for
its winding up or dissolution, becomes unable to pay its debts as and when they
fall due, or has a receiver, receiver and manager, administrator, liquidator,
provisional liquidator, official manager or administrator appointed to it or
any of its assets; or
35
36
(c) By Buyer or Seller if any Governmental Entity shall have
issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement; or
(d) By either party if the Closing does not occur by May 31,
1999.
11.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of termination
of this Agreement by any or all of the parties pursuant to Section 11.1,
written notice shall be given to each other party specifying the provision of
Section 11.1 pursuant to which such termination is made and this Agreement
shall become void and there shall be no liability on the part of Buyer or
Seller (or their respective officers, directors, partners or Affiliates),
except as a result of any breach of this Agreement by such party. In the event
that either party terminates this Agreement in breach of this Section 11 or
breaches this Agreement in a manner that causes the other party to terminate
this Agreement, the non-breaching party shall be entitled to an amount equal to
One Hundred Thousand Dollars ($100,000) as liquidated damages in lieu of all
claims, actions or remedies, at law or in equity, which such party may have
against the breaching party arising out of such breach.
12. MISCELLANEOUS.
12.1 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
or waived with the written consent of the parties or their respective
successors and assigns. Any amendment or waiver effected in accordance with
this Section 12.1 shall be binding upon the parties and their respective
successors and assigns.
12.2 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
12.3 GOVERNING LAW; JURISDICTION. This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of California, without giving effect to principles of conflicts of
law. Each of the parties to this Agreement consents to the exclusive
jurisdiction and venue of the courts of the state and federal courts of San
Mateo County, California with respect to disputes relating to this Agreement.
12.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
12.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
36
37
12.6 NOTICES. Any notice required or permitted by this Agreement shall
be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
forty-eight (48) hours after being deposited in the regular mail as certified
or registered mail (airmail if sent internationally) with postage prepaid, if
such notice is addressed to the party to be notified at such party's address or
facsimile number as set forth below, or as subsequently modified by written
notice, and (a) if to Buyer:
General Counsel
000 Xxxxxx Xxxxxxx, Mailstop 5op7
Xxxxxxx Xxxxxx, XX 00000
Facsimile Number: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxx, Xx., Esq.
Venture Law Group
A Professional Corporation
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Facsimile Number: (000) 000-0000
or (b) if to Seller:
Xxxxxx Xxxxxxx
Thinking Machines Corporation
0000 Xxx Xxxxxxx Xxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Facsimile Number: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxxxx, Esq.
Hill & Xxxxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Facsimile Number: (000) 000-0000
12.7 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith, in order to maintain the economic position
enjoyed by each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall
37
38
be excluded from this Agreement, (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
12.8 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein are the product of both of the parties hereto, and constitute the entire
agreement between such parties pertaining to the subject matter hereof and
thereof, and merge all prior negotiations and drafts of the parties with regard
to the transactions contemplated herein and therein. Any and all other written
or oral agreements existing between the parties hereto regarding such
transactions are expressly canceled.
12.9 ADVICE OF LEGAL COUNSEL. Each party acknowledges and represents
that, in executing this Agreement, it has had the opportunity to seek advice as
to its legal rights from legal counsel and that the person signing on its
behalf has read and understood all of the terms and provisions of this
Agreement. This Agreement shall not be construed against any party by reason of
the drafting or preparation thereof.
12.10 INTERPRETATION. This Agreement, including any exhibits, addenda,
schedules and amendments, has been negotiated at arm's length and between
persons sophisticated and knowledgeable in the matters dealt with in this
Agreement. Each party has been represented by experienced and knowledgeable
legal counsel. Accordingly, any rule of law (including California Civil Code
Section 1654) or legal decision that would require interpretation of any
ambiguities in this Agreement against the party that has drafted it is not
applicable and is waived. The provisions of this Agreement shall be interpreted
in a reasonable manner to effect the purposes of the parties and this
Agreement.
12.11 ABSENCE OF THIRD-PARTY BENEFICIARIES. No provisions of this
Agreement, express or implied, are intended or shall be construed to confer
upon or give to any Person other than the parties hereto, any rights, remedies
or other benefits under or by reason of this Agreement unless specifically
provided otherwise herein, and except as so provided, all provisions hereof
shall be personal solely between the parties to this Agreement.
12.12 EXPENSES. Each of the parties agrees to pay its own expenses in
connection with the transactions contemplated by this Agreement, including
without limitation legal, consulting, accounting and investment banking fees,
whether or not such transactions are consummated.
[Signature pages follow]
38
39
This Agreement has been duly executed and delivered by the duly
authorized officers of Seller and Buyer as of the date first above written.
ORACLE CORPORATION
By: /s/ Xxxx X. Xxxxx
--------------------------------------------
Name: Xxxx X. Xxxxx
Title: Executive Vice President,
System Products Division
THINKING MACHINES CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Chief Executive Officer and President
39
40
SCHEDULE 2.4
EARN-OUT PAYMENTS
FOR PURPOSES OF SCHEDULE 2.4, THE "TARGET NET FEES" SHALL MEAN THE FOLLOWING
NET FEES GENERATED IN THE TWELVE-MONTH PERIODS SET FORTH BELOW:
TWELVE-MONTH PERIOD ENDED NOVEMBER 30, TARGET NET FEES
-------------------------------------- ---------------
2000 $5 MILLION
2001 $10 MILLION
2002 $21 MILLION
EARN-OUT PAYMENTS.
1. Subject to Buyer's right to offset the Earn-Out Payments in the event
of Seller's breach of its representations, warranties or covenants under the
Agreement (or agreements attached as Exhibits thereto), Buyer agrees to pay
Seller the Earn-Out Payments set forth below in Section 2 based on Net Fees.
(a) "NET FEES" shall mean (i) license fees recognized by Buyer in
accordance with GAAP from its licensees and distributors for Darwin (including
any New Releases or Natural Successors to Darwin made or developed after the
Closing Date), net of any returns, adjustments, third party license fees (if
any), shipping costs, or sales, use or other similar taxes paid or (ii) in the
event that all or any portion of Darwin is embedded or incorporated into an
application or other product of Buyer, the Relative Value Percentage multiplied
by the license fees recognized by Buyer in accordance with GAAP from its
licensees and distributors for such application or product, net of any returns,
adjustments, third party license fees (if any), shipping costs, or sales, use
or other similar taxes paid.
(b) "NEW RELEASES" shall mean any releases of Darwin created on or
after the Closing.
(c) "NATURAL SUCCESSORS" shall mean any product that substantially
replaces Darwin.
(d) "RELATIVE VALUE PERCENTAGE" shall mean the percentage of relative
value Darwin (or portion thereof) contributes to such product, when considering
such product as a whole, as determined by Oracle's internal allocation
procedures, provided such allocation reasonably reflects the relative value of
Darwin to such product. For example, if it is determined that the Relative
Value Percentage of Darwin, as embedded in an application is 5% of such
application's total value, and the license fee for such application is $100,
the Net Fees for such license would equal $5 (i.e. 5% x $100).
(e) Seller understands and acknowledges that Oracle generally makes
subsequent releases of its products available to licensees at no additional
license fee, provided such licensee has ordered "Technical Support" for the
relevant time period (a "Subsequent Release License"). Notwithstanding anything
else contained in this Schedule 2.4, no Earn-Out Payments or other charge shall
be payable by Oracle with respect to any Subsequent Release License provided as
part of such Technical Support for any licenses of Darwin, New Releases and/or
Natural Successors or any application or other product into which Darwin has
been embedded or incorporated.
41
2. (a) EARN-OUT PAYMENTS. Provided that actual aggregate Net Fees EXCEED the
Target Net Fees for the corresponding twelve-month period ending November 30,
2000 through November 30, 2002 (the "EARN-OUT PERIOD"), Buyer will pay Seller
an earn out equal to 15% percent of the amount by which the actual Net Fees
exceed the Target Net Fees for a specified twelve-month period. For example, if
the Net Fees in the period ended November 30, 2001 equal $22 million, then,
assuming no other adjustment, set off or credit is applicable, Seller would be
entitled to receive an additional $1,800,000 (i.e. 15% x ($22M - $10M)). No
Earn-Out Payments will be owed for any Net Fees recognized by Buyer after the
Earn-Out Period.
(b) All such payments shall be made within sixty (60) days following the
end of each twelve-month period and shall relate to the amounts due with
respect to each such completed twelve-month period. A written report showing
the Net Fees for such twelve-month period and the calculation of the Earn-Out
Payment shall accompany such payments. In addition, within 60 days after the
end of each of Buyer's fiscal quarters, Buyer shall provide Seller with a
written report showing the Net Fees for such quarter.
3. ALLOCATION OF NET FEES. In the event that Buyer or its distributors license
Darwin with other Buyer products or services for a single price, Net Fees from
such license shall equal the total Net Fees received by Buyer from the license
multiplied by a fraction A/(A+B), where A equals the list price of Darwin
licensed separately and B equals the list price of the other products or
services, provided such allocation reasonably reflects the relative value of
Darwin to the other Buyer products. For example, if Buyer licensed a set of
products for a single price of $360 (after giving effect to a discount), where
the list price of Darwin is $100, and the list price of all other products is
$300, then Net Fees for that transaction shall equal $90 (i.e. 100/(100+300) x
$360). If Darwin is bundled in a site license or package deal, and fees for
Darwin are not distinguishable from fees for other Oracle products that are
part of the site license or package deal, the Net Fees for Darwin shall be
based on the fee allocation made by Oracle's internal procedures, provided such
allocation reasonably reflects the relative value of Darwin to the other Oracle
products.
4. MAXIMUM AGGREGATE PAYMENT. Notwithstanding anything to the contrary herein,
the total aggregate Earn-Out Payments payable hereunder shall not exceed
$20,300,000.
